14 ms·

We spent 40 years chasing down and eliminating every redundancy, buffer, backup, and alternative in the name of "efficiency" all the while globalising every sys

We spent 40 years chasing down and eliminating every redundancy, buffer, backup, and alternative in the name of "efficiency" all the while globalising every system we could. Even the slightest hiccup is liable to bring such a fragile system down, and this was not a slight hiccup. And as supplies dwindle throughout the system, demand increases at every interface point, not just the end-users. This machine is not going to come back up as it is. It just can't. We need to start putting those backups and redundancies back in place, which will cost throughput, latency, and (fuckloads of) capital.

R0b0t1 5y ago
Supply tends to be very elastic when demand exists. There are shortages, yes, but for some price I can get almost anything you could ask for. I'm pretty sure part of what we are seeing is price gouging. E.g. for many electrical products I see that the stock has shifted to resellers, you can look on octopart (assuming part is large enough to be tracked). What's hard to evaluate is how real the shipping shortage is. It may be partially people demanding more pay, or it may be entirely a shortage.
toomuchtodo 5y ago
Yes, but you must use regulation to require a resilient supply chain, as it’s cheaper not to build it to be resilient. Capital optimizes for capital, people must optimize for people.
- R0b0t1 5y ago
  Well, no. A lot of businesses would store spare parts save the fact they are taxed quite heavily in some jurisdictions. My experience with lean/JIT in the manufacturing space shows when it is actually done at every level your business starts hemorrhaging money waiting for parts to arrive. Each step of the process unless perfectly foretold adds 1-3 weeks in a good quarter. It is actually the local preference that we keep more spares than we do, but accounting says no. If you read the fine print with how Toyota implemented lean you find out that they made their partners contractually obligated to keep inventory, not themselves. Inventory was still kept but who paid the tax bill and who paid upkeep changed.
  - Optimal_Persona 5y ago
    Agreed, I worked in food manufacturing for a while, and was fortunate to have suppliers who maintained 1-2 shifts worth of almost all obscure components as a good-faith gesture. As most of our own backstock was perishable, FIFO rotation kept us from having way too much, or any tax issues. I learned it was much better to deal with CEO/investors grumbling about $$$ tied up in backstock than Type A Sales Manager + CEO/investors wondering when the f^ck a single critical component would let us restart the production line to launch an overdue product. I don't miss that job! There was also the "Google the new CEO on his first day and find out he's under SEC investigation for withholding payments to his previous corp's suppliers to pad the balance sheet for buyout" but that is another story entirely!
  - dv_dt 5y ago
    So don’t form the regulation that way… it could be as simple as allowing a write off for a small percentage of buffer inventory.
    - simonh 5y ago
      That sounds pretty easily gameable, and how do you calculate an appropriate percentage that applies to many different businesses and industries? This sort of regulatory micro-managing is generally a really bad idea unless the regulator works very closely with the business. But that means greatly increased costs of implementing the regulations.
  - magicalhippo 5y ago
    A lot of our customers, especially those with internet shops, are moving to bonded warehouses where they can keep the goods without paying import taxes until they need the part or made the sale. Then they do an import declaration on just what they need/sold. This way they don't have to cash out for whole containers at a time. Sure they'll have to pay for more declarations, but overall it's usually worth it, especially if the goods can sit there for a year or more. Our customs systems here is totally not made for this new world though.
- refurb 5y ago
  So central planning? “Regulations state that all manufacturers must maintain 30 days inventory of critical supplies”. That would just make things worse.
  - deleted 5y ago
    [deleted]
  - VortexDream 5y ago
    I always wonder why Americans jump from one extreme to another. There are plenty of solutions in between free market and central planning, you know?
    - refurb 5y ago
      Of course there is. But directing how much inventory a company has to hold seems a bit more invasive than say, demanding a company can't dump chemicals on the ground?
  - imtringued 5y ago
    Nowadays even something as banal as collecting taxes is considered central planning... the word lost its meaning very quickly. I don't know why people demand even more "free market" when governments spent 40 years giving more power to the private sector.
- mcguire 5y ago
  And a resilient electricity supply system, as Texas discovered.
  - Mountain_Skies 5y ago
    Can you explain this? Last year a tropic storm came through north Georgia and our power was out for twice as long as it was out in Texas but for some reason Texas is now the poster child for unreliable power delivery while unless you live in north Georgia, you're probably not even aware there was an extended outage last October. Are those of us in Georgia beneath your notice?
    - toomuchtodo 5y ago
      Texas’ power market is dysfunctional. It has no capacity market, so generators aren’t paid to have a certain amount of generation capacity available. It’s every generator for themselves. This is great during normal times, and drives down the cost of power. “Cheap energy is good!”, says Texas. During times of crisis, you end up with bankruptcies, enormous bills, and people going without power (and in extreme weather conditions, ending up dead, as happens in February in Texas) when they otherwise wouldn’t have to in a functioning electrical system where electrical generation capacity was firm and compensated. ERCOT also didn’t know it was shedding natural gas compressor station circuits when performing rotating blackouts, causing a cascading failure when natural gas generators were starved of fuel. That’s just plain ol’ incompetence.
      - mcguire 5y ago
        Exactly. https://en.wikipedia.org/wiki/2021_Texas_power_crisis https://en.wikipedia.org/wiki/2021_Texas_power_crisis
      - thaumasiotes 5y ago
        > ERCOT also didn’t know it was shedding natural gas compressor station circuits when performing rotating blackouts, causing a cascading failure when natural gas generators were starved of fuel. That’s just plain ol’ incompetence. And despite all that incompetence, they were much better at maintaining the power supply than north Georgia. That would seem to imply that the system is even better than the performance gap would indicate.
- nickff 5y ago
  If you want companies to hold more inventory (complete or not), a good first move would be to stop taxing them for it. After doing that, we could look at whether additional regulatory measures were required. If you want them to in-house more production, allow all of them to write-off 100% of capital equipment purchases in the first year.
  - jxramos 5y ago
    curious, who's taxing for inventory?
    - R0b0t1 5y ago
      It's property so basically everyone
      - jxramos 5y ago
        so just property tax then, like an empty warehouse holds the same tax burden as one filled to capacity with inventory? I thought someone was suggesting more than property tax.
        R0b0t1 5y ago
        What is in the warehouse is property also
        nickff 5y ago
        Corporations are taxed on assets that they accrue (increases in total holdings are taxed as 'profit'). This applies to inventories, capital assets, and real estate. This taxation is why corporations often prefer to lease rather than own, and why they often pay out dividends rather than using the money to collect assets.
        jxramos 5y ago
        wow, I never knew that. I always perceived inventories as risks companies took assuming they'd be able to sell it all or at the least would be able to liquidate it at cost if it came to it. Sounds like the books are already negative just taking on inventory from the get go above production and shipping and whatever else.
- magila 5y ago
  Please no. The last thing we need is another bunch of half-baked regulations passed because a bunch of people who don't know what they're talking about demanded "something must be done!" in response to some temporary crisis. COVID will subside eventually, dysfunctional regulations have much greater staying power.
  - toomuchtodo 5y ago
    The regulations are not for COVID. They are for future supply chain shocks. The executive branch has already begun to explore the problem (see citation below). “The 100-day reports make clear: more secure and resilient supply chains are essential to our national security, our economic security, and our technological leadership. The work of strengthening America’s critical supply chains will require sustained focus and investment.” https://www.whitehouse.gov/wp-content/uploads/2021/06/100-day-supply-chain-review-report.pdf https://www.whitehouse.gov/wp-content/uploads/2021/06/100-da...
    - ryan93 5y ago
      No one is starving. Somethings are just temporarily more expensive.
      - uchiga 5y ago
        Did you reply to the wrong comment?
      - deleted 5y ago
        [deleted]
      - DangitBobby 5y ago
        Things being temporarily more expensive is a real hardship for some people.
        fspeech 5y ago
        Demanding it not be so will make things permanently more expensive for everyone, not only in the monetary sense, but also in labor and material. Subsidize or ration if we must, but only temporarily and in response to a crisis.
Mountain_Skies 5y ago
But we won't put those redundancies back in, at least not at scale, because the economic benefits of not having them for each individual economic actor means those who don't chase efficiency as ruthlessly as others will get eliminated. These redundancies somehow have to be mandated for everyone in a particular economic space so no one is disadvantaged for being robust against such supply line interruptions.
- deleted 5y ago
  [deleted]
- mlac 5y ago
  Any supplier who could actually sell right now would be able to take advantage of this market and build serious market share. So it’s a company with these reserves that will do well in a similar situation.
  - est31 5y ago
    It might do well in these crises, but if it can't survive the times where everything works well, then it doesn't help.
    - mlac 5y ago
      That’s fair, but I think we will see a swing to vertically integrated supply chains to address some of this risk.
      - OneTimePetes 5y ago
        We already have, its just not visible. Those who had stockpiles of chips (Toyota, many other japanese companies affected by the 2011 tsunami) were able to supply and provide products, thus taking market share - or sell chips at a larger price as demand sored. This strategy of holding strategic reserves on premium goods already paid for itself. Similar to that, the scalpers - horders of rare/in demand products fullfill that job in capitalism - at the risk of sitting on a pile of lowprice good.
1270018080 5y ago
You might implement redundancies and raise costs, but your competitors won't. And we'll be right back to where we were pre pandemic.
- Sophistifunk 5y ago
  No, we won't. The system can't be brought back up in that configuration. That's how cascading failure modes work. To get back to the volumes we have been used to a more resilient system must be built. Only then can it be made brittle again by relentlessly pruning "inefficiencies"
losvedir 5y ago
Are you sure things aren't better now than 40 years ago? Everything is certainly more affordable for the average American and the standard of living is higher than ever. Sure, there was a run on toilet paper when the pandemic started and wood prices at Home Depot right now are through the roof (heh), but my gut feeling is the trade off is worth it. To continue your analogy it's like the world's supply chains stopped colocating their own servers, shedding unused capacity, in favor of AWS. Sure, there will be a hiccup under unexpected load, but new instances will spin up soon enough and meanwhile you've saved a ton of money, resources, and energy when demand was low.
- asdff 5y ago
  Everything but housing and education you mean. Standard of living is probably on the whole worse. My dad had a high school education and a ridiculously good pension, full health vision dental, profit sharing, working in the maintenance department in the 80s.
  - OneEyedRobot 5y ago
    >Everything but housing and education you mean. Do you think it's due to changes in technology? political beliefs? or overpopulation?
    - tov247 5y ago
      The best reason for housing prices increasing faster than inflation is that the western world has made it policy that middle-class wealth is based on housing prices rising faster than inflation so many economic actors will personally benefit from higher and higher housing prices.
      - deleted 5y ago
        [deleted]
    - asdff 5y ago
      Its really just because of supply and demand. We made it illegal to add more supply. Los Angeles up until the 1960s was zoned for 10 million people with a population under 3 million, you were allowed to develop your single family home into a 25 foot wide 5 story brick apartment building and many of these went up in neighborhoods like hollywood and koreatown. Today homes are out of reach for middle class because we have a population of 3.9 million in los angeles, but have a zoning capacity of only 4.2 million. It's not exactly rocket science how to fix this mess. Legalize building housing and housing will appear to satiate demand. https://la.curbed.com/2015/4/8/9972362/everything-wrong-with https://la.curbed.com/2015/4/8/9972362/everything-wrong-with...
Gustomaximus 5y ago
I'm not sure we do. Right now this supply side sux but it will likely be fixed in a few years no doubt. The risk if we bring an overly heavy hand of government is greater issues on other areas. Sure they'll make sure computer chips are available but maybe at twice the price or half the quality as factories just need to hit volume numbers, or potential to. It might stop new entrants as e.g. now they have to build a factoryfor twice the actual sales capacity and that cost doesn't make sense. And surely a bunch more. I do think certain items should be deemed essential and local production encouraged, off the cuff but 30% needs to be domestically sourced type thing. Like what we saw with medical equipment in the early days of covid. When times get tough, countries get selfish fast and a nation needssome level of protection for adverse events. But forcing business to over deliver capacity seems likely to bring in a whole other level of issues and likely cronyism. At least in my non-expert view we shoot should ensure the most basic survival items like food, essential medicine and energy have significant redundancy. After that, we need to take the risk to allow capitalism to do what's its best and and create efficient production or I suspect we will being greater issues in replacement of the ones we solve.
fny 5y ago
Lol. It's not that bad. How can you claim a hiccup could bring down "such a fragile system" when the pandemic caused inconveniences and elevated prices. Sure you wouldn't able to buy toilet paper and meat disappeared from the shelves for a few months, but you have to remember we actually shut down the ENTIRE economy, and now we're back with a few things still out of whack. These shortages are also primarily due to behavioral shifts which redundancy will not correct. Demand for suburban housing skyrocketed since no one wanted to live in the city. Services spending shifted to goods. Global travel halted. Everyone wanted to redo their flooring in the same 3 months. Everyone stopped buying cars, and now everyone wants one to get out of the house or for that new home they bought during the pandemic. I mean, you could pay up to hedge against all of these, but I'm pretty sure 40 years of hedging would have not been a wise investment. Now I do agree with creating redundancies for critical goods as a hedge against geopolitical tensions, but that's a different story.
- profile53 5y ago
  Conversely I think the pandemic showed how robust supply chains are. Supply was able to be rapidly reallocated to different products with nothing more than some mild hiccups. The price of cars went up 20% or so, PS5s are hard to find without paying scalpers, and toilet paper is more expensive, but cars, PlayStations, and toilet paper are still being manufactured. Car production went down but electronic device manufacturing as a whole increased. Clothing manufacturing decreased, but mask and PPE production increased 100 fold, as did medical devices and medications.
  - simonh 5y ago
    Also this is a big opportunity for the economy. There's big demand for lots of stuff and companies around the world are scrabbling to adjust. There's also plenty of capital around to invest in them. People are now used to tightening their belts a bit, more picky about their jobs and more willing to embrace change. I think many workers have a good chance to benefit in all this.
- throwawaylinux 5y ago
  I agree COVID seems like more of a counter-point to the idea that supply chains are incredibly fragile. But who shut down their entire economy? The US laid off maybe a little over 10% of the workforce at its maximum, by the looks, so that's not entirely shut down even at maximum hyperbole.
londons_explore 5y ago
Get rid of 'price gouging protection' and simple economics will make businesses put back in supply redundancy. The issue today is it's more profitable to sell at rock bottom prices 95% of the time and be out of stock 5% of the time, then it is to sell at a higher price always (to pay for the buffer). Selling at rock bottom prices 95% of the time and high prices 5% of the time (to pay for the buffer) is best, but currently illegal.
imtringued 5y ago
I don't think it's that bad but you are right. One big problem with capitalism and the free market is that people are really overdoing it with efficiency and optimization. I once read an article with the thought experiment about what we should do if the productivity in everything we do doubled. We would have twice as much table salt. So what do we do? Well there are two options. Keep the table salt just in case. Downsize production immediately and use the spare capacity on something else. The funny part in economics is that most of the time the "something else" is unemployment and so many economists believe that this is a good thing. Fans of the gold standard will talk about how you are supposed to suffer through the bust while forgetting that gold mining picks up and saved the day so many times even though it is wholly unproductive.
pif 5y ago
Let me sum up for you: we spent 40 years looking for "cheaper". Whether it was the right thing to look for, I don't know. But "cheaper" is the word that has shaped the world in the last decades.
Gravityloss 5y ago
I think it's the same with everything like agile software development etc. There are some ideas with some good parts, but the way people end up applying them can cause a lot of problems. People should understand the domain, do risk analysis, change management etc. For example car companies are suffering from chip shortages. Maybe they should have stockpiled more? But on the other hand, the "parts bin" is the worst obstacle preventing innovation and integration in established manufacturers. Why do new companies like Tesla have way less electronic parts while legacy manufacturers have lots of separate boxes and wiring, all reducing reliability, increasing cost, space and mass. Because for a legacy manufacturer it makes more sense to use the same parts from the "parts bin" as for their previous model - it's just cheaper and faster, the supply chain already exists. https://www.youtube.com/watch?v=ZRkm6-bBk4U https://www.youtube.com/watch?v=ZRkm6-bBk4U
forrestthewoods 5y ago
> Even the slightest hiccup is liable to bring such a fragile system down If the pandemic has taught me anything it’s that our supply chain is extraordinarily resilient. Bend, don’t break.
neilwilson 5y ago
We are rediscovering the eternal tradeoff between efficiency and resilience. Market competition can only work if there is sufficient independent suppliers in the market that a failure of one of them can be absorbed by the buffer expansion capacity of the others. Drop below that and the efficiency gains of the market killing inefficient competitors are lost due to a shortage of supply.
RussellXYZ 5y ago
Something no one has mentioned is that following American sanctions on Chinese companies, those companies stockpiled an enormous quantity of micro chips of all kinds. Maybe they are still doing it. They want to insulate themselves from further chip supply problems, that created chip supply problems for everyone else.
BiteCode_dev 5y ago
Honestly given the situation, I think the disruptions we are experiencing are actually quite small. I'm surprised, impressed even, by the reliability of our house of cards.
admax88qqq 5y ago
Lol why? Things are pretty good. A few items are still overly expensive like GPUs and rental cars. But most basics are back to normal. Why use "fuckloads of capital" to build redundacy just so that toilet paper doesn't become scarce for a few weeks on the next 50 years.

R0b0t1 5y ago

Supply tends to be very elastic when demand exists. There are shortages, yes, but for some price I can get almost anything you could ask for. I'm pretty sure part of what we are seeing is price gouging. E.g. for many electrical products I see that the stock has shifted to resellers, you can look on octopart (assuming part is large enough to be tracked). What's hard to evaluate is how real the shipping shortage is. It may be partially people demanding more pay, or it may be entirely a shortage.

toomuchtodo 5y ago

Yes, but you must use regulation to require a resilient supply chain, as it’s cheaper not to build it to be resilient. Capital optimizes for capital, people must optimize for people.

R0b0t1 5y ago
Well, no. A lot of businesses would store spare parts save the fact they are taxed quite heavily in some jurisdictions. My experience with lean/JIT in the manufacturing space shows when it is actually done at every level your business starts hemorrhaging money waiting for parts to arrive. Each step of the process unless perfectly foretold adds 1-3 weeks in a good quarter. It is actually the local preference that we keep more spares than we do, but accounting says no. If you read the fine print with how Toyota implemented lean you find out that they made their partners contractually obligated to keep inventory, not themselves. Inventory was still kept but who paid the tax bill and who paid upkeep changed.
- Optimal_Persona 5y ago
  Agreed, I worked in food manufacturing for a while, and was fortunate to have suppliers who maintained 1-2 shifts worth of almost all obscure components as a good-faith gesture. As most of our own backstock was perishable, FIFO rotation kept us from having way too much, or any tax issues. I learned it was much better to deal with CEO/investors grumbling about $$$ tied up in backstock than Type A Sales Manager + CEO/investors wondering when the f^ck a single critical component would let us restart the production line to launch an overdue product. I don't miss that job! There was also the "Google the new CEO on his first day and find out he's under SEC investigation for withholding payments to his previous corp's suppliers to pad the balance sheet for buyout" but that is another story entirely!
- dv_dt 5y ago
  So don’t form the regulation that way… it could be as simple as allowing a write off for a small percentage of buffer inventory.
  - simonh 5y ago
    That sounds pretty easily gameable, and how do you calculate an appropriate percentage that applies to many different businesses and industries? This sort of regulatory micro-managing is generally a really bad idea unless the regulator works very closely with the business. But that means greatly increased costs of implementing the regulations.
- magicalhippo 5y ago
  A lot of our customers, especially those with internet shops, are moving to bonded warehouses where they can keep the goods without paying import taxes until they need the part or made the sale. Then they do an import declaration on just what they need/sold. This way they don't have to cash out for whole containers at a time. Sure they'll have to pay for more declarations, but overall it's usually worth it, especially if the goods can sit there for a year or more. Our customs systems here is totally not made for this new world though.
refurb 5y ago
So central planning? “Regulations state that all manufacturers must maintain 30 days inventory of critical supplies”. That would just make things worse.
- deleted 5y ago
  [deleted]
- VortexDream 5y ago
  I always wonder why Americans jump from one extreme to another. There are plenty of solutions in between free market and central planning, you know?
  - refurb 5y ago
    Of course there is. But directing how much inventory a company has to hold seems a bit more invasive than say, demanding a company can't dump chemicals on the ground?
- imtringued 5y ago
  Nowadays even something as banal as collecting taxes is considered central planning... the word lost its meaning very quickly. I don't know why people demand even more "free market" when governments spent 40 years giving more power to the private sector.
mcguire 5y ago
And a resilient electricity supply system, as Texas discovered.
- Mountain_Skies 5y ago
  Can you explain this? Last year a tropic storm came through north Georgia and our power was out for twice as long as it was out in Texas but for some reason Texas is now the poster child for unreliable power delivery while unless you live in north Georgia, you're probably not even aware there was an extended outage last October. Are those of us in Georgia beneath your notice?
  - toomuchtodo 5y ago
    Texas’ power market is dysfunctional. It has no capacity market, so generators aren’t paid to have a certain amount of generation capacity available. It’s every generator for themselves. This is great during normal times, and drives down the cost of power. “Cheap energy is good!”, says Texas. During times of crisis, you end up with bankruptcies, enormous bills, and people going without power (and in extreme weather conditions, ending up dead, as happens in February in Texas) when they otherwise wouldn’t have to in a functioning electrical system where electrical generation capacity was firm and compensated. ERCOT also didn’t know it was shedding natural gas compressor station circuits when performing rotating blackouts, causing a cascading failure when natural gas generators were starved of fuel. That’s just plain ol’ incompetence.
    - mcguire 5y ago
      Exactly. https://en.wikipedia.org/wiki/2021_Texas_power_crisis https://en.wikipedia.org/wiki/2021_Texas_power_crisis
    - thaumasiotes 5y ago
      > ERCOT also didn’t know it was shedding natural gas compressor station circuits when performing rotating blackouts, causing a cascading failure when natural gas generators were starved of fuel. That’s just plain ol’ incompetence. And despite all that incompetence, they were much better at maintaining the power supply than north Georgia. That would seem to imply that the system is even better than the performance gap would indicate.
nickff 5y ago
If you want companies to hold more inventory (complete or not), a good first move would be to stop taxing them for it. After doing that, we could look at whether additional regulatory measures were required. If you want them to in-house more production, allow all of them to write-off 100% of capital equipment purchases in the first year.
- jxramos 5y ago
  curious, who's taxing for inventory?
  - R0b0t1 5y ago
    It's property so basically everyone
    - jxramos 5y ago
      so just property tax then, like an empty warehouse holds the same tax burden as one filled to capacity with inventory? I thought someone was suggesting more than property tax.
      - R0b0t1 5y ago
        What is in the warehouse is property also
      - nickff 5y ago
        Corporations are taxed on assets that they accrue (increases in total holdings are taxed as 'profit'). This applies to inventories, capital assets, and real estate. This taxation is why corporations often prefer to lease rather than own, and why they often pay out dividends rather than using the money to collect assets.
        jxramos 5y ago
        wow, I never knew that. I always perceived inventories as risks companies took assuming they'd be able to sell it all or at the least would be able to liquidate it at cost if it came to it. Sounds like the books are already negative just taking on inventory from the get go above production and shipping and whatever else.
magila 5y ago
Please no. The last thing we need is another bunch of half-baked regulations passed because a bunch of people who don't know what they're talking about demanded "something must be done!" in response to some temporary crisis. COVID will subside eventually, dysfunctional regulations have much greater staying power.
- toomuchtodo 5y ago
  The regulations are not for COVID. They are for future supply chain shocks. The executive branch has already begun to explore the problem (see citation below). “The 100-day reports make clear: more secure and resilient supply chains are essential to our national security, our economic security, and our technological leadership. The work of strengthening America’s critical supply chains will require sustained focus and investment.” https://www.whitehouse.gov/wp-content/uploads/2021/06/100-day-supply-chain-review-report.pdf https://www.whitehouse.gov/wp-content/uploads/2021/06/100-da...
  - ryan93 5y ago
    No one is starving. Somethings are just temporarily more expensive.
    - uchiga 5y ago
      Did you reply to the wrong comment?
    - deleted 5y ago
      [deleted]
    - DangitBobby 5y ago
      Things being temporarily more expensive is a real hardship for some people.
      - fspeech 5y ago
        Demanding it not be so will make things permanently more expensive for everyone, not only in the monetary sense, but also in labor and material. Subsidize or ration if we must, but only temporarily and in response to a crisis.

Mountain_Skies 5y ago

But we won't put those redundancies back in, at least not at scale, because the economic benefits of not having them for each individual economic actor means those who don't chase efficiency as ruthlessly as others will get eliminated. These redundancies somehow have to be mandated for everyone in a particular economic space so no one is disadvantaged for being robust against such supply line interruptions.

deleted 5y ago
[deleted]
mlac 5y ago
Any supplier who could actually sell right now would be able to take advantage of this market and build serious market share. So it’s a company with these reserves that will do well in a similar situation.
- est31 5y ago
  It might do well in these crises, but if it can't survive the times where everything works well, then it doesn't help.
  - mlac 5y ago
    That’s fair, but I think we will see a swing to vertically integrated supply chains to address some of this risk.
    - OneTimePetes 5y ago
      We already have, its just not visible. Those who had stockpiles of chips (Toyota, many other japanese companies affected by the 2011 tsunami) were able to supply and provide products, thus taking market share - or sell chips at a larger price as demand sored. This strategy of holding strategic reserves on premium goods already paid for itself. Similar to that, the scalpers - horders of rare/in demand products fullfill that job in capitalism - at the risk of sitting on a pile of lowprice good.

1270018080 5y ago

You might implement redundancies and raise costs, but your competitors won't. And we'll be right back to where we were pre pandemic.

Sophistifunk 5y ago
No, we won't. The system can't be brought back up in that configuration. That's how cascading failure modes work. To get back to the volumes we have been used to a more resilient system must be built. Only then can it be made brittle again by relentlessly pruning "inefficiencies"

losvedir 5y ago

Are you sure things aren't better now than 40 years ago? Everything is certainly more affordable for the average American and the standard of living is higher than ever. Sure, there was a run on toilet paper when the pandemic started and wood prices at Home Depot right now are through the roof (heh), but my gut feeling is the trade off is worth it. To continue your analogy it's like the world's supply chains stopped colocating their own servers, shedding unused capacity, in favor of AWS. Sure, there will be a hiccup under unexpected load, but new instances will spin up soon enough and meanwhile you've saved a ton of money, resources, and energy when demand was low.

asdff 5y ago
Everything but housing and education you mean. Standard of living is probably on the whole worse. My dad had a high school education and a ridiculously good pension, full health vision dental, profit sharing, working in the maintenance department in the 80s.
- OneEyedRobot 5y ago
  >Everything but housing and education you mean. Do you think it's due to changes in technology? political beliefs? or overpopulation?
  - tov247 5y ago
    The best reason for housing prices increasing faster than inflation is that the western world has made it policy that middle-class wealth is based on housing prices rising faster than inflation so many economic actors will personally benefit from higher and higher housing prices.
    - deleted 5y ago
      [deleted]
  - asdff 5y ago
    Its really just because of supply and demand. We made it illegal to add more supply. Los Angeles up until the 1960s was zoned for 10 million people with a population under 3 million, you were allowed to develop your single family home into a 25 foot wide 5 story brick apartment building and many of these went up in neighborhoods like hollywood and koreatown. Today homes are out of reach for middle class because we have a population of 3.9 million in los angeles, but have a zoning capacity of only 4.2 million. It's not exactly rocket science how to fix this mess. Legalize building housing and housing will appear to satiate demand. https://la.curbed.com/2015/4/8/9972362/everything-wrong-with https://la.curbed.com/2015/4/8/9972362/everything-wrong-with...

Gustomaximus 5y ago

I'm not sure we do. Right now this supply side sux but it will likely be fixed in a few years no doubt. The risk if we bring an overly heavy hand of government is greater issues on other areas. Sure they'll make sure computer chips are available but maybe at twice the price or half the quality as factories just need to hit volume numbers, or potential to. It might stop new entrants as e.g. now they have to build a factoryfor twice the actual sales capacity and that cost doesn't make sense. And surely a bunch more. I do think certain items should be deemed essential and local production encouraged, off the cuff but 30% needs to be domestically sourced type thing. Like what we saw with medical equipment in the early days of covid. When times get tough, countries get selfish fast and a nation needssome level of protection for adverse events. But forcing business to over deliver capacity seems likely to bring in a whole other level of issues and likely cronyism. At least in my non-expert view we shoot should ensure the most basic survival items like food, essential medicine and energy have significant redundancy. After that, we need to take the risk to allow capitalism to do what's its best and and create efficient production or I suspect we will being greater issues in replacement of the ones we solve.

fny 5y ago

Lol. It's not that bad. How can you claim a hiccup could bring down "such a fragile system" when the pandemic caused inconveniences and elevated prices. Sure you wouldn't able to buy toilet paper and meat disappeared from the shelves for a few months, but you have to remember we actually shut down the ENTIRE economy, and now we're back with a few things still out of whack. These shortages are also primarily due to behavioral shifts which redundancy will not correct. Demand for suburban housing skyrocketed since no one wanted to live in the city. Services spending shifted to goods. Global travel halted. Everyone wanted to redo their flooring in the same 3 months. Everyone stopped buying cars, and now everyone wants one to get out of the house or for that new home they bought during the pandemic. I mean, you could pay up to hedge against all of these, but I'm pretty sure 40 years of hedging would have not been a wise investment. Now I do agree with creating redundancies for critical goods as a hedge against geopolitical tensions, but that's a different story.

profile53 5y ago
Conversely I think the pandemic showed how robust supply chains are. Supply was able to be rapidly reallocated to different products with nothing more than some mild hiccups. The price of cars went up 20% or so, PS5s are hard to find without paying scalpers, and toilet paper is more expensive, but cars, PlayStations, and toilet paper are still being manufactured. Car production went down but electronic device manufacturing as a whole increased. Clothing manufacturing decreased, but mask and PPE production increased 100 fold, as did medical devices and medications.
- simonh 5y ago
  Also this is a big opportunity for the economy. There's big demand for lots of stuff and companies around the world are scrabbling to adjust. There's also plenty of capital around to invest in them. People are now used to tightening their belts a bit, more picky about their jobs and more willing to embrace change. I think many workers have a good chance to benefit in all this.
throwawaylinux 5y ago
I agree COVID seems like more of a counter-point to the idea that supply chains are incredibly fragile. But who shut down their entire economy? The US laid off maybe a little over 10% of the workforce at its maximum, by the looks, so that's not entirely shut down even at maximum hyperbole.

londons_explore 5y ago

Get rid of 'price gouging protection' and simple economics will make businesses put back in supply redundancy. The issue today is it's more profitable to sell at rock bottom prices 95% of the time and be out of stock 5% of the time, then it is to sell at a higher price always (to pay for the buffer). Selling at rock bottom prices 95% of the time and high prices 5% of the time (to pay for the buffer) is best, but currently illegal.

imtringued 5y ago

I don't think it's that bad but you are right. One big problem with capitalism and the free market is that people are really overdoing it with efficiency and optimization. I once read an article with the thought experiment about what we should do if the productivity in everything we do doubled. We would have twice as much table salt. So what do we do? Well there are two options. Keep the table salt just in case. Downsize production immediately and use the spare capacity on something else. The funny part in economics is that most of the time the "something else" is unemployment and so many economists believe that this is a good thing. Fans of the gold standard will talk about how you are supposed to suffer through the bust while forgetting that gold mining picks up and saved the day so many times even though it is wholly unproductive.

pif 5y ago

Let me sum up for you: we spent 40 years looking for "cheaper". Whether it was the right thing to look for, I don't know. But "cheaper" is the word that has shaped the world in the last decades.

Gravityloss 5y ago

I think it's the same with everything like agile software development etc. There are some ideas with some good parts, but the way people end up applying them can cause a lot of problems. People should understand the domain, do risk analysis, change management etc. For example car companies are suffering from chip shortages. Maybe they should have stockpiled more? But on the other hand, the "parts bin" is the worst obstacle preventing innovation and integration in established manufacturers. Why do new companies like Tesla have way less electronic parts while legacy manufacturers have lots of separate boxes and wiring, all reducing reliability, increasing cost, space and mass. Because for a legacy manufacturer it makes more sense to use the same parts from the "parts bin" as for their previous model - it's just cheaper and faster, the supply chain already exists. https://www.youtube.com/watch?v=ZRkm6-bBk4U https://www.youtube.com/watch?v=ZRkm6-bBk4U

forrestthewoods 5y ago

> Even the slightest hiccup is liable to bring such a fragile system down If the pandemic has taught me anything it’s that our supply chain is extraordinarily resilient. Bend, don’t break.

neilwilson 5y ago

We are rediscovering the eternal tradeoff between efficiency and resilience. Market competition can only work if there is sufficient independent suppliers in the market that a failure of one of them can be absorbed by the buffer expansion capacity of the others. Drop below that and the efficiency gains of the market killing inefficient competitors are lost due to a shortage of supply.

RussellXYZ 5y ago

Something no one has mentioned is that following American sanctions on Chinese companies, those companies stockpiled an enormous quantity of micro chips of all kinds. Maybe they are still doing it. They want to insulate themselves from further chip supply problems, that created chip supply problems for everyone else.

BiteCode_dev 5y ago

Honestly given the situation, I think the disruptions we are experiencing are actually quite small. I'm surprised, impressed even, by the reliability of our house of cards.

admax88qqq 5y ago

Lol why? Things are pretty good. A few items are still overly expensive like GPUs and rental cars. But most basics are back to normal. Why use "fuckloads of capital" to build redundacy just so that toilet paper doesn't become scarce for a few weeks on the next 50 years.